Capital Plc is a house-building company that plans to build 100houses for the nextfour years.Year1234Number of Small152015houses soldNumber of large781515houses soldThe company purchase the development site for £4,000,000 beforebuilding the small houses and large houses. Besides, the fixedinfrastructure costs of £1,500,000per annum with a 2% inflation rate perannum.The financial information for the current selling price and variable cost is asfollows:SmallLargeHouseHouseSelling Price£220,000£350,000Variable cost of£100,000£200,000constructionThe selling price inflation of 3% per annum and the variable cost ofconstruction inflation is 4.5% per annum. The company has a 12per cent required return on this project. The corporate tax is 24%. You are the Senior Management Accountant ofCapital Plc.Yourequired towriteareacomprehensive report to the Board of the company,which discusses how the following investmentappraisal techniques are used in making capitalinvestment decisions, looking at the merits anddemerits of each technique and their limitations.Your report should include your calculations of thesetechniques, which should be in the Appendices not inthe body of your report. Please use the spreadsheettool to calculate your answer and submit it togetherwith your report.> Net cash flow from year 0 to year 4.> Payback Period of the proposed investment.> The Accounting Rate of Return of the proposed investment.> The Net Present Value of the proposed investment> The Internal Rate of Return of the proposed investment> Comments on the viability of the proposed investmentMaximum: 1200 words

Net Present Value - A financial term called net present value (NPV) aims to measure the total value…

Capital Plc is a house-building company that plans to build 100 houses for the nextfour years. Year Number of Small houses sold Number of large houses sold annum. 1 15 7 Selling Price Variable cost of construction 2 20 8 3 15 The company purchase the development site for £4,000,000 before building the small houses and large houses. Besides, the fixed infrastructure costs of £1,500,000 per annum with a 2% inflation rate per Small House £220,000 15 £100,000 4 5 The financial information for the current selling price and variable cost is as follows: 15 Large House £350,000 £200,000 The selling price inflation of 3% per annum and the variable cost of construction inflation is 4.5% per annum. The company has a 12 per cent required return on this project. The corporate tax is 24%.

Capital Plc is a house-building company that plans to build 100 houses for the nextfour years. Year Number of Small houses sold Number of large houses sold annum. 1 15 7 Selling Price Variable cost of construction 2 20 8 3 15 The company purchase the development site for £4,000,000 before building the small houses and large houses. Besides, the fixed infrastructure costs of £1,500,000 per annum with a 2% inflation rate per Small House £220,000 15 £100,000 4 5 The financial information for the current selling price and variable cost is as follows: 15 Large House £350,000 £200,000 The selling price inflation of 3% per annum and the variable cost of construction inflation is 4.5% per annum. The company has a 12 per cent required return on this project. The corporate tax is 24%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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